By Jacob Bunge and Rachel Feintzeig
A feat of corporate and fiscal engineering, Dow Chemical Co. and
DuPont Co.'s planned megamerger hinges on finding the right
chemistry with about 100,000 employees.
Senior leaders who have spent decades at the two giants poised
to be dismantled are coping with upended career prospects and
attempting to keep their staff focused amid the merger of two
companies with a combined value of $103 billion.
At the same time, they could find themselves in line for plum
positions when the new company--DowDuPont--eventually separates the
combined businesses into three units focused on agriculture,
industrial materials and specialty expected within three years.
Recruiters, coaches and executives who have weathered deals and
integrations say it is a tough process.
"On one side of your mind you're saying, 'Tomorrow will be like
today.' You go about and do your job," says Robert Lynn Oakes, who
worked for Rohm & Haas Co. when Dow acquired the chemical maker
in 2009. He stayed for three years afterward before leaving in 2012
because he was told he would have to relocate. "In the back of your
mind, you're looking for opportunities," he said.
Executives aim to close the deal by year's end and staffing
changes are likely to follow. Corporate leaders have said they plan
to eliminate about $3 billion in annual costs before spinning off
the companies.
The companies, which together employ about 100,000 scientists,
salesmen, factory workers and other staff, already have taken steps
to shed thousands of jobs, separate from the deal.
The moves also could put many managers in play.
John Touey, a principal with Radnor, Penn.-based executive
search firm Salveson Stetson Group Inc., said executives typically
become more receptive to outside recruiters 90 to 120 days after an
announcement--a time when top leaders are still closing the deal,
but can't yet execute detailed integration planning, he said.
"When an organization can't articulate what this executive's
place is going to be in the new organization, the more of a flight
risk they become," Mr. Touey said.
Edward Breen, DuPont's chairman and chief executive, said in an
interview that he has spoken extensively with senior-level managers
at DuPont since the deal was announced in December, stressing the
scale and heft of the spin-off companies and instructing senior
officials to spread the word among staff in an effort to reassure
and motivate employees.
He also is dispatching lieutenants to DuPont facilities around
the world to detail plans and field employees' questions.
"The human capital side is the most important part of this,"
said Mr. Breen, who will be the CEO of DowDuPont.
At Dow, managers have grown accustomed to change following a
decade in which the company spun off some businesses and bought
others, said CEO Andrew Liveris. Still, he acknowledged that
portraying deals as "a win-win" for staff is hard.
"There's a lot of shakiness that goes on in this very early
period," he said, adding that the company "lost a lot of top
players" from Rohm & Haas during the 2009 acquisition.
"No one wants their cheese moved," said Mr. Liveris, who will be
executive chairman of the combined company. "No one wants
instability."
Privately, some managers at both companies say they're feeling
upbeat about the merger-to-split plan. Yet others have begun
exploring job opportunities elsewhere, say people familiar with the
matter.
Their options appear limited, though. The slumping farm economy
and slowing growth in overseas markets such as China and Brazil
mean that competitors are feeling pain. Monsanto Co. plans to cut
16% of its global workforce, while 3M Co. last year outlined plans
to lay off about 1.7% of its workforce.
Mr. Breen, who separated multiple businesses at Tyco
International Ltd. during his time as CEO there from July 2002
until Sept. 2012, has said combining the two chemical giants'
businesses will benefit managers--after all, there will be three
C-suites to fill, not one.
"When you lay that out for employees, that's very strong and
powerful," he said.
Mr. Liveris said he also is preaching focus and calm to keep
workers on task, especially those whose jobs likely won't be
affected by the merger.
"The greatest risk during this period of uncertainty is you drop
the ball on existing business," Mr. Liveris said. Bosses will tell
workers who will retain their jobs, "You're in a normal place.
Please press on," he said. Both Dow and DuPont have set aside sums
for retention bonuses.
To gear up executives to lead the spinoffs, Mr. Breen said he
and Mr. Liveris will include them in investment and strategy
decisions well ahead of the breakup, allowing them to outline plans
and take questions on the merged company's earnings calls.
At DuPont, Mr. Breen is using uncertainty to motivate his
managers, just as he did at Tyco, telling those in line to lead
spinoffs that their future jobs depend on their teams' performance
during the transition.
"When I did this at Tyco, the excitement of these management
teams...was so strong, they were working day and night," Mr. Breen
said. Leaders for the planned spinoff units are expected to be
chosen at least six months ahead of the separation.
Annual executive turnover at merged companies have averaged
double the normal rate for nearly a decade following deals,
according to research by Jeffrey Krug, dean of the business school
at Bloomsburg University of Pennsylvania. "The greater degree to
which you integrate assets, the higher the rates of turnover,
because integration is disruptive," he said. The chemical giants'
merger-to-spinoff plan, expected to take up to three years, could
result in even higher turnover, Mr. Krug added.
Mr. Oakes, the former Rohm & Haas and Dow employee, said the
earlier merger process triggered a "chain reaction of anxiety"
among staff. While he kept his direct reports on task by setting
deadlines and advancing projects, Mr. Oakes said he also stayed in
touch with recruiters and contacts, just in case. He switched roles
several times before leaving in 2012.
At Pep Boys--Manny, Moe & Jack the work climate changed
after the auto parts retailer and servicer announced it was up for
sale in the fall, according to Jim Flanagan, the company's
human-resources chief.
In a typical month, about four of the company's 470 corporate
employees would leave; now about 14 are departing each month, Mr.
Flanagan said. The chain is proceeding with a sale to investment
firm Icahn Enterprises.
Some employees at the Philadelphia-based company have ramped up
networking on LinkedIn and are meeting with recruiters, according
to Mr. Flanagan. Meanwhile, it has been hard to muster enthusiasm
for some new projects, he observed.
Knowing Pep Boys' independent days are numbered, Mr. Flanagan
said, "takes all that energy and creativity out of the job."
(END) Dow Jones Newswires
January 12, 2016 15:39 ET (20:39 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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